A Bank of Uganda (BOU) report has revealed that Commercial Banks recorded profits to a tune of Shs 874 Billion between March and September 2020.
This is despite the Covid-19 pandemic that led to the closure of many businesses after the country went into lockdown.
According to the Central Bank’s quarterly financial stability deview report, the banking sector remained adequately capitalized to absorb emerging shocks and that the capital increase was largely boosted by an improvement in aggregate profitability.
“On an annual basis, aggregate banking sector profitability increased for the 12 months ended September 2020. The net-after-tax profit for commercial banks and microfinance deposit-taking Institutions (MDIs) rose by 6.9 percent to Shs 874.3 billion and 1.5 percent to Shs 13.8 billion respectively, while credit institutions registered an aggregate loss of Shs 5.5 billion, for the year ended September 2020,” the report partly reads.
The Central Bank explains that profitability was boosted by a decrease in provisions for bad debts but warns of potential deterioration in asset quality that could lead to an increase in specific provisions and erodes the banking sector’s profits whilst reducing capital buffers.
It also says that increased concentration and segmentation of the banking sector remains a concern with potential implications for the competitiveness and efficiency of the sector going forward.
As at end of September 2020, BOU stated, five large banks accounted for 62.1 percent of total industry assets, and earned 75.2 percent of the industry profits for the year ended.